Guyana in the spotlight

ExxonMobil’s double hit offshore Guyana this week has put the country in the spotlight with expectations of becoming a serious upstream player by early next decade, however, some roadblocks lie ahead, according to Wood Mackenzie.

Map of Guyana. Images from Wood Mackenzie.

"It's not often that a country goes from 0 to 60 so fast like this," says Matt Blomerth, Wood Mackenzie head of Latin America upstream research.

Earlier this week, Exxon announced its second oil discovery at Payara-1 on Guyana’s Stabroek Block, and further success at the giant Liza field that revealed the area’s high potential.

“After drilling a dry hole at the Skipjack prospect in September, Payara and Liza-3 reconfirm the high potential of the Cretaceous play in Guyana’s deep waters. Payara’s proximity to Liza enables economies of scale for the area's development,” says Wood Mackenzie. “The Guyanese government’s approval of a US$500 million oil and gas service hub on Crab Island will give added impetus.”

However, WoodMac says that the lack of infrastructure is a growing concern, especially for gas.

“We estimate wellhead gas volumes of 2.1-2.5 Tcf between Liza and Payara,” the global natural resources consultancy firm says. “With no offshore infrastructure or nearby gas market, the partners will face high costs to dispose whatever gas that cannot be reinjected or flared.”

On 12 January, Exxon hit liquid gold with its new ultra deepwater Payara-1 discovery with more than 95ft (29m) of high-quality, oil-bearing sandstone in two Upper Cretaceous reservoirs of Maastrichtian-Aptian age, similar to Liza. Payara-1 was drilled to 18,080ft (5512m) in 6660ft (2030m) water depth and lies 16km to the southeast of the Liza discovery.

Exxon subsequently drilled two sidetrack wells, and a production test is planned to further evaluate the discovery. In addition, appraisal drilling is planned beginning later this year to determine the full resource potential of the Payara discovery, and a drill stem test (DST) has already begun to flow-test one of the reservoirs.

At its giant Liza discovery, appraisal drilling at Liza-3 identified an additional high quality, deeper reservoir directly below the field, which is estimated to contain between 100-150 MMboe, Exxon said. This additional resource is currently being evaluated for development in conjunction with the Liza discovery. This news has led Wood Mackenzie to increase its base case to 1.24 billion boe in its updated Liza field analysis.

Guyana's production could reach 350,000 b/d by 2023. Source: WoodMac

“We model a 180,000 b/d FPSO for Liza, and our updated base case now shows the floater producing near capacity until 2030. We assume a second FPSO will be needed at Payara. We modelled two scenarios for Payara, a high case assuming reserves of 500 MMboe exploited by a 150,000 b/d FPSO and a low case assuming 300 MMboe producing to a 100,000 b/d FPSO. Payara's NPV10 would vary between $1.6 billion and $426 million, assuming a long-term Brent oil price of $65/bbl,” says WoodMac.

“Activity will continue at a fast pace with the DST on Payara, a wildcat at the Snoek prospect, and additional appraisal drilling on the two discoveries,” the firm says.

Yesterday (12 January), partner Hess Corp. said it was investing $125 million for development activities at Liza in Guyana, and $350 million to drill wells on the Stabroek Block, which include appraising Liza, the recent Payara discovery, and new exploration prospects. Additional funds are included for seismic acquisition and processing and for license acquisitions.